Lagos, Nigeria – Nigerian companies are finally getting some relief after struggling with a dollar shortage for years. Recent reforms by the Central Bank of Nigeria (CBN) have led to a significant increase in dollar liquidity in the foreign exchange market, allowing businesses to settle overdue debts and import essential materials.
Dollar availability jumped a staggering 90% on Tuesday compared to the previous day, according to Chapel Hill Denham, a financial services firm. This positive trend comes after the CBN took steps to boost dollar supply, including raising interest rates to attract foreign investment and abandoning the fixed exchange rate system.
The improved access to dollars is a welcome change for Nigerian companies. BUA Foods, the country’s leading food and beverage company, has already reduced its debts by 6% in the first quarter of 2024 thanks to the increased liquidity. “This will undoubtedly have a positive impact moving forward,” said BUA Foods Managing Director Ayodele Abioye, expressing optimism for the rest of the year.
Cadbury Nigeria is another beneficiary. The company’s Finance Director, Ogaga Ologe, confirmed they can now access all their dollar needs through official channels. This has allowed them to plan ahead and purchase foreign materials without draining their local currency reserves.
“The increased dollar liquidity is a lifeline for companies,” said Adetilewa Adebajo, Chief Executive of Lagos-based CFG Advisory. “It allows them to pay down debts and soften the blow of the recent currency devaluation.” However, Adebajo cautions that sustained improvement is crucial for businesses to achieve a real turnaround.
“The authorities need to ensure positive real interest rates, meaning interest rates that outpace inflation,” Adebajo explained. “Additionally, fiscal responsibility in government spending is vital for long-term stability.”
The positive impact extends to MTN Nigeria, the country’s largest mobile operator. The company used the improved forex market to significantly reduce its letter of credit obligations, a move aimed at curbing losses.
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